PRESIDENT BARACK OBAMA: The time to take charge of our future is
here.

STEPHANOPOULOS: Obama's ambitions.

OBAMA: Health care cannot wait. Double this nation's supply of
renewable energy. Make sure that you can afford a higher education.

STEPHANOPOULOS: Is the president's bold agenda achievable? Will
Congress choke on the cost? We'll ask the cabinet member who wrote
Obama's budget and the congressman who's now the president's sparring
partner.

OBAMA: I'm going to keep on talking to Eric Cantor. Some day,
he's going to say, "Boy, Obama had a good idea."

STEPHANOPOULOS: ... a promise kept. But why are Democrats more
skeptical than Republicans? That and the rest of the week's politics
on our powerhouse roundtable with George Will, Katrina vanden Heuvel,
plus, Bill Clinton's pollster Stan Greenberg and George W. Bush
strategist Karl Rove.

And, as always, the Sunday funnies.

BILL MAHER, TALK SHOW HOST: It was a powerful speech. Joe Biden
said it made the hair that was transplanted from the back of his neck
stand up.

(END VIDEO CLIP)

ANNOUNCER: From the heart of the nation's capital, "This Week"
with ABC News chief Washington correspondent George Stephanopoulos,
live from the Newseum on Pennsylvania Avenue.

STEPHANOPOULOS: Hello again. The headlines screamed out all
this week, each day another sweeping proposal from President Obama and
each day more signs of just how sick our economy is, with warnings
that another depression is increasingly possible.

The key question: How should government respond to this economic
emergency? We'll hear from both sides this morning, starting with the
key player crafting President Obama's budget, Budget Director Peter
Orszag.

Welcome to "This Week," your first Sunday show appearance.

ORSZAG: Good morning.
STEPHANOPOULOS: Let me begin with the budget, $3.6 trillion on
Thursday, you said you could cut the deficit in half over the next
five years, based on reasonable but somewhat optimistic assumptions.
Then, on Friday, we learn that the economy dropped more than 6 percent
in the fourth quarter of last year. Does that mean you have to go
back to the drawing board?

ORSZAG: I think what it means is it just underscores that we've
inherited these pair of trillion-dollar deficits. Remember, that was
a very negative number for the end of last year before we took office.
It just...

STEPHANOPOULOS: But it affects this year.

ORSZAG: It does. It just -- it -- and that's why we have these
two problems that we need to face, the trillion-dollar gap between how
much the economy is producing and how much it could produce and then
these trillion-dollar deficits under current policies.

The first thing we had to do was get the recovery act enacted.
We did that. That's intended to address that first gap, the GDP gap.
As we go out over time and the economy recovers, we need to get those
out-year deficits down, and that's what this budget does.

STEPHANOPOULOS: But the question is, is the stimulus going to be
enough to actually get the kind of growth you're calling for? I want
to show a chart here that shows where the OMB projections of the
economy turn up right now.

You say that, over the next year, the economy is going to fall
about 1.2 percent, the average private forecast 2.0 percent. The case
you're putting to the banks, the stress tests you're putting on the
banks assumes that the economy is going to fall by 3.3 percent.

And, you know, economists like Allen Sinai say it's a hope, a
wing, and a prayer. It's a return to a sanguine view of the economy
that is simply not justified.

ORSZAG: Well, what I would say is, our forecast is entirely in
line with, for example, the Congressional Budget Office's, once you
include the effects of the recovery act. Now, since those forecasts
were done...

STEPHANOPOULOS: You got this bad news about last year.

ORSZAG: ... and the -- which is why it's a good thing we acted
so quickly on the recovery act. Going out over time, we have to get
these out-year deficits down, and that's what we're intended to do.

STEPHANOPOULOS: But -- but -- but looking at this year, because
your whole deficit reduction strategy hinges on the economy growing at
the rate you say it's going to grow. It is still realistic to think
your numbers are going to be met?

ORSZAG: I think so. And, again, the deficit reduction doesn't
just come from the economy recovering. And by 2013 or 2014, let's all
hope that the economy is back on its feet. That's what we're trying
to do through all -- all the changes that we're making.

But we have $2 trillion in deficit reduction contained in the
budget. We've got both spending constraints and additional revenue,
as the economy recovers. That's where a lot of the deficit reduction
comes from.

STEPHANOPOULOS: But most of the deficit reduction comes from
assuming at first that the war in Iraq was going to continue at the
same levels for several years, and that simply wasn't going to happen,
was it?

ORSZAG: Well, let's -- let's be clear about this. We're going
to spend about $140 billion on the war this year. The president is
committed to getting -- to winding down the war. That's going to save
money. It's pretty clear.

STEPHANOPOULOS: The Republicans have taken aim specifically at
the revenues in this package, especially the idea you have to get
about $600 billion from capping carbon emissions. Here was Newt
Gingrich speaking this week.

(END VIDEO CLIP)

GINGRICH: How dumb do they think we are that they can pretend
that an energy tax isn't an energy tax, and they can pretend that
every retired American who uses electricity isn't going to pay it, and
every person in New Hampshire who uses heating oil isn't going to pay
it, and every person who drives a car isn't going to pay it?

(END VIDEO CLIP)

STEPHANOPOULOS: You've talked a lot about honesty and
transparency in the budget. The Republicans are saying you're simply
not being honest, that this revenue from the carbon -- from capping
carbon tax is going to be a tax on everyone, pure and simple.

ORSZAG: What's very clear is this budget delivers a tax cut to
95 percent of working families. I mean, I think we have to come back
to the basic question here. I just reject the theory that the only
thing that drives economic performance is the marginal tax rate on
wealthy Americans and the only way of being pro-market is to funnel
billions and billions of dollars of subsidies to corporations.

That is the heart of this argument. And I think it's -- I think
we've already -- we've seen what the effects are over the last eight
years.

STEPHANOPOULOS: But you do concede that this capping of carbon
emissions is going to increase energy rates for just about everyone in
the country? And that is the equivalent of a tax, isn't it?

ORSZAG: Well, I think we have to be -- let's be fair about this.
Either you're going to look at what -- what is collected through the
tax code and what's returned through the tax code.

And on that basis, there's a tax cut for 95 percent of Americans,
or you have to go all in. Let's also count the benefits that families
get through Pell Grants, the benefits that they'll receive through
constraining health care costs, the benefits that they get from
weatherizing their homes, and so on. All in, this budget makes the
vast majority of American families much better off.

STEPHANOPOULOS: So you're not -- you're not disputing that this
package -- the cap-and-trade on its own will increase prices for --
for most Americans, but they're going to be getting other benefits in
the budget?

ORSZAG: Absolutely.

STEPHANOPOULOS: And there is also -- the Republicans are also
taking aim -- including our next guest, Eric Cantor -- at your
proposal to shave deductions, the benefit of the deductions for
Americans earning over $250,000 a year. Congressman Cantor says, "Is
there any better time to have charities in full throttle than when you
have tough economic times?" Your response?
ORSZAG: There's been a lot of confusion about this, too. Let's
be clear about several things. First, the best thing that could help
charitable contributions is to get the economy back on its feet. That
was the whole goal of the recovery act.

This proposal doesn't take effect until 2011. The revenue would
be dedicated to health care reform, and that is the key to our fiscal
future, so let's keep our eye on that.

Furthermore, the majority of contributions come from middle-class
families. And you have to ask this fundamental question...

STEPHANOPOULOS: Who, you say, aren't going to be hit by this?

ORSZAG: Not only are not going to be hit by it, but let's ask a
question of fairness. A middle-class family makes $1,000 contribution
to a charity, they get $150 back on their taxes. Bill Gates makes
that same contribution, $1,000 to the same charity, he gets $350 back
on his taxes. All we're saying is the tax break for Bill Gates should
be walked back a bit to $280.

STEPHANOPOULOS: But you know it's not just Republicans who have
a problem with this proposal. Key Democrats, like the chairman of the
Senate Budget Committee, Kent Conrad, I think Senator Baucus, as well,
have said, wait a second, we're not sure we can go along with this.
If the Senate and the House will not go along with this proposal to
shave deductions, does that mean you'll scale back your health care
promises?

ORSZAG: Well, we hope they will go along with it. And what we
have said is...

STEPHANOPOULOS: I know, but that's not what I asked.

ORSZAG: But let's be clear about the health reform. Health care
is the key to our fiscal future. We are going to make sure that it is
not only self-financing over the next 5 to 10 years, which means if
that revenue stream isn't available, something else will have to be.

And in addition, those reforms to health care, making the system
more efficient, will help bend the curve over the long term and vastly
improve our long-term fiscal future.

STEPHANOPOULOS: So that's an important point. Just to be clear,
then, you're saying you will not increase the deficit more than we
have right now in order to pay for that health care? If the revenues
don't come in, then you will not go forward with the health care?

ORSZAG: We need some other proposal. No, no, that's -- we're
going forward with health care. We're going to get health care reform
done this year. I think this proposal will get enacted. But if it --
if it doesn't, then we're going to need to come up with some other
offset.

STEPHANOPOULOS: Congress will have to fill the hole. But what
if they don't?
ORSZAG: Look, we want to get health care reform done this year,
and we want to do it in a way that doesn't add to the deficit and that
also helps bend the curve over the long term.

STEPHANOPOULOS: A lot of people I talked to on Capitol Hill say,
you know, they look at the scope of this, and they worry that you're
going to overload the circuits in the House and the Senate in
Congress. Can you really go forward with the kind of health care
proposal you're talking about here, a more than $600 billion reserve
fund, and go forward with the energy proposals, more than $600 billion
in revenue? Can you do both this year? And if you can't, which one
takes priority?

ORSZAG: I think we can. We face big problems, and we've got to
-- we've got to tackle them. Clearly, this budget is changing course.
It's, like, you know -- and the GPS system is recalculating the route
and people are getting used to that. But we -- we have these big
problems, and we need to tackle them.

STEPHANOPOULOS: And in order to get it, though, you saw how
difficult it was to actually spend money, give benefits with the
stimulus package. You're scrapping for those three Republican votes.
Some key Democrats on Capitol Hill are saying, if you want to do all
of these big projects this year, you're going to have to follow what
is called the reconciliation process, put health care, put energy
inside the reconciliation process so that the effect of it is you only
need 51 votes, not 60. Is that the administration's intention?

ORSZAG: I think it's premature to be figuring out the
legislative strategy exactly right now.

STEPHANOPOULOS: But you're not ruling it out?

ORSZAG: It's not where we go first, but we have to keep
everything on the table. We want to get these -- these important
things done this year.

STEPHANOPOULOS: How about on the bank bailout? The president
was pretty clear on Tuesday night that more funds might be needed for
the banks.

(BEGIN VIDEO CLIP)

OBAMA: This plan will require significant resources from the
federal government and, yes, probably more than we've already set
aside. But while the cost of action will be great, I can assure you
that the cost of inaction will be far greater.

(END VIDEO CLIP)

STEPHANOPOULOS: You've put a $750 billion placeholder in the
budget for the banks. Is that what you're going to be requesting from
the Congress?

ORSZAG: No, let's again be clear about this. The budget is
intending to be responsible. We put a placeholder in there just as an
insurance policy should additional financial stabilization efforts
become...

STEPHANOPOULOS: But he was pretty clear you're going to need
more money.

ORSZAG: It's not -- look, let's -- if additional efforts become
necessary, we'll work with Congress on the scale and scope of them.
We wanted to put a placeholder in just in case, because there's a lot
of uncertainty, obviously, and, again, just to be responsible, we
thought it was better to put a placeholder than -- than nothing.

STEPHANOPOULOS: But the odds are that you're going to need
something. The president was clear on that. We've gotten nothing but
bad news out of the banks over the last week. And it was also clear
from the last time the TARP, the bank bailout, was voted on that this
is going to be a very tough vote. And I'm -- I know from my own
reporting that, if this were put to a vote today, you do not have the
votes in the House or the Senate. What's going to have to change to
get congressional support?

ORSZAG: Well, again, we don't have a legislative proposal at
this point. We have a placeholder just in case something becomes
necessary. We would work with the Congress to craft a response,
should one become necessary, that would pass.

STEPHANOPOULOS: The -- you've seen some bipartisan criticism
over the long-term impact of this budget, real concern over the long-
term increase to the debt from both the Democratic chairman of the
Senate Budget Committee and the Republican ranking member, Senator
Gregg. Take a look.
(BEGIN VIDEO CLIP)

SEN. KENT CONRAD, D-N.D.: I'm concerned about the long-term
build-up of debt. I'm especially concerned about the second five
years of this budget.

SEN. JUDD GREGG, R-N.H.: This budget doubles the debt of the
federal government in 5 years, triples the debt of the federal
government in 10 years.

(END VIDEO CLIP)

STEPHANOPOULOS: They want to solve the problem by creating a
commission, similar to the base-closing commission, where Congress and
the administration would come together, come up with a package of
revenue increases, spending cuts, and then force an up-or-down vote in
the Congress. The president told a group, according to the Wall
Street Journal, of Blue Dog Democrats last month that he was for this
proposal. Is he?

ORSZAG: Well, I think it's clear that we need some changes in
the process, whether it's the one that Senators Conrad and Gregg have
proposed or ones that are more focused on health care. And let's --
let's focus on that, because that is the key driver of those long-term
deficits.

That's why we want to get reform done this year. We can make our
health care system much more efficient, and that is the single most
important thing we could do to get those long-term deficits under
control.

STEPHANOPOULOS: So -- so to be clear on that, are you then, I
mean, looking for a -- some kind of a commission for health care?

ORSZAG: Well, there are different ideas that have been out there
on health care. For example, Senator Baucus, the chairman of the
Senate Finance Committee, has proposed a federal health board that
would move a lot of the decision-making away from the Senate Finance
Committee and the -- and the Congress in general towards a group of
more politically insulated and technically skilled people.

STEPHANOPOULOS: So you're for that, but not for a broader budget
commission right now?

ORSZAG: Well, I'm just saying, there are lots of ideas floating
around out there. And, obviously, one of the things that came out of
the fiscal responsibility summit that we had last week is a discussion
about the best way of moving forward. We will be exploring all of
these ideas with the Congress. And, clearly, I think some changes are
necessary, whether it's the focus on health care or -- or our
broader...

STEPHANOPOULOS: So open to it, but no final decision?

ORSZAG: Yes.
STEPHANOPOULOS: Finally, this week the Senate is going to be
debating an omnibus spending proposal that has several thousand
earmarks. The president was very clear that he wanted earmark reform
during the campaign, said he wanted to get back to 1994 levels.
Congressman Cantor, who's coming up, says the president ought to veto
this budget because there are so many earmarks in it, yet the
Democratic leaders in the Senate are defending the proposal.

(BEGIN VIDEO CLIP)

SEN. HARRY REID, D-NEV., SENATE MAJORITY LEADER: Since we've
been a country, we have had the obligation as a Congress to help
direct spending. We cannot let spending be done by a bunch of
nameless, faceless bureaucrats buried in this town someplace.

(END VIDEO CLIP)

STEPHANOPOULOS: I don't think he meant that personally to you,
but there's a real showdown here between the president's priorities.
There's a lot of spending in that bill, investments that he thinks are
important. There are also several thousand earmarks. So does that
mean he signs the bill or vetoes it?

ORSZAG: We want to -- this is last year's business. We want to
just move on. Let's get this bill done, get it into law and move
forward.

STEPHANOPOULOS: So he'll sign it?

ORSZAG: Yes.

STEPHANOPOULOS: And what kind of earmark reform will he call
for?

ORSZAG: We're going to be working with the Congress. We want to
make sure that earmarks are reduced and they're also transparent.
We're going to work with the Congress on a set of reforms to achieve
those...

(CROSSTALK)

STEPHANOPOULOS: But he signs this bill this year?

ORSZAG: This is -- this is last year's business. We just need
to move on.

STEPHANOPOULOS: Peter Orszag, thanks very much.

ORSZAG: Thank you.

STEPHANOPOULOS: Now, for the Republican perspective, we go to
Congressman Eric Cantor. He comes to us from Richmond, Virginia.

Let's start where I just ended with Mr. Orszag right there. You
heard it. The president's not taking your advice on the omnibus
spending bill.

CANTOR: Good morning, George. Listen, I mean, the president was
elected by the people of this country to institute change in
Washington and to finally demand a federal government that is
accountable to the people. We have a -- almost a $500 billion omnibus
bill that came out of the House that will be considered by the Senate.

You know, I think that we need to put our money where our mouth
is and not just do as I say, not as I do. We have got to institute
reform so that the public can regain their confidence. The fact that
there are 9,000 earmarks in this bill and the fact that the vetting
process just doesn't take place the way it should, we ought to stand
up and draw the line right now and stop the waste.

I mean, George, we cannot continue to afford to throw trillions
of dollars out a week on the backs of the people of this country.

STEPHANOPOULOS: So you oppose the president on the omnibus
spending bill. Obviously, you opposed the president on the stimulus
package. Your colleagues give you a lot of credit for executing the
strategy whereby no Republicans in the House voted for the president's
recovery package. Will any House Republicans vote for the president's
budget?

CANTOR: Listen, George, this budget obviously has raised a lot
of concerns and a lot of different areas. But let's remember what the
priority should be right now. The priority should be focused on
preserving and protecting creating new jobs.

I mean, I talk to small-business people in my district all the
time. They're hurting right now. They're not even taking home a
paycheck, and they're struggling to make the bills at the end of the
month and to keep the lights on. That spells real danger for our
economy.

So we need to focus our efforts to make sure that what we do in
Washington does one thing and one thing first, and that is to focus on
economic growth.

STEPHANOPOULOS: So the president...

CANTOR: And this budget -- this budget will have -- we will have
to work on this budget a lot in order to get this spending plan into
that type of focus.

STEPHANOPOULOS: So let me go back to the same question: Will
any Republicans vote for this budget?
CANTOR: Well, George, as you know, you know, this budget has to
make its way through the House. And, again, we want to work with this
president. We want people to regain their confidence in Washington.
And what people are looking for is results.

Again, go back to that small-business person. People are
hurting. They're looking for policies that finally will institute job
growth, not just transfers of wealth.

And what we see in this budget, frankly, is an attempt, again, to
try and stimulate the economy through government expenditure. And,
you know, at best what that can do is redistribute wealth. It can't
create jobs; it can't create wealth. We've got to get back to
focusing on job creation and creating prosperity.

STEPHANOPOULOS: So it's clear that you're against this budget.
You're not going to make a prediction. But let me move on to the
broader political question here. Right now, you've made your views on
-- on the economy, on these proposals pretty clear, but the public
seems to be siding with President Obama. His approval rating is still
quite high on the economy itself.

Who do you trust to handle the economy? According to our ABC
News poll, 61 percent say they trust President Obama. Only 26 percent
trust the Republican Party. That's the largest gap we've seen in a
generation.

On who's reaching out to the other side, 73 percent say that
President Obama is reaching out to work with the Republicans, but only
34 percent think that Republicans are reaching out to work with the
president.

Are you worried that the impression that you're not working with
the -- the president, you're not trusted on the economy, and you're
rooting for him to fail is going to burn in and be burned in and
locked in with the American public?

CANTOR: George, nobody -- no Republican, no Democrat -- wants
this president to fail, nor do they want this country to fail or the
economy to fail. What we did in the House during the first weeks of
the stimulus debate is to come up with a plan. I personally handed
that plan to President Obama at his suggestion. He said, "Bring us
your ideas."

We developed a plan that, frankly, we felt could create twice as
many jobs at half the cost. Now, that plan did not make its way into
Speaker Pelosi's stimulus bill. But that doesn't mean...

STEPHANOPOULOS: Now, the White House -- let me just stop you
there, because the president says and the White House says that they
did incorporate some of your suggestions. They incorporated some of
the tax cut suggestions you had; they also incorporated your ideas on
government transparency to put -- to put the spending up on a Web site
so everybody knew what was going on.

CANTOR: Well -- well, George, again, on the transparency issue,
when I met with then-President-elect Obama, I suggested that we put
everything up online immediately so we could have some ventilation of
ideas in this country. Unfortunately, what went up online was the
finished product once everything was hammered out, and the public did
not have enough opportunity to, I think, opine on what they felt their
taxpayer dollars should be spent on.

But, look, at the end of the day, the public is looking for
results. They're tired of Washington just throwing money at a problem
without having a well-thought-out plan.

That's what we need to do. We need to focus on how we can return
to an era of job creation, of more confidence on the part of small-
business people, so that the middle class in this country can regain
the financial security that they lost through regaining job security.

STEPHANOPOULOS: You know, it's not just Democrats who say that
the Republican response has been wanting. Governor Jon Huntsman of
Utah made some -- made some headlines this week when he -- he talked
about the approach of the Republican leadership here in Washington.
Here's what he had to say.

(BEGIN VIDEO CLIP)

GOV. JON HUNTSMAN JR., R-UTAH: I've not met them. I don't
listen or read to whatever it is they say, because it's
inconsequential completely. The future of our party will be based
upon what happens in the laboratories and the incubators of democracy,
make no mistake about it.

(END VIDEO CLIP)

STEPHANOPOULOS: Those are some pretty harsh words from a member
of your own party, a governor of your own party.

CANTOR: Well, I cannot comment, because I haven't spoken to the
governor. But let me -- let's say this, George. You know that the
House Republicans have 178 members in the House out of 435. Speaker
Pelosi does not need our votes to pass any legislation.

But what we need to do as a party is we need to be out there
positing affirmative plans, positive alternatives to the problems
facing this country. And, frankly, I believe that the people of this
country think that we are spending entirely too much money, the money
that we don't have. And as we see in this budget that has been
presented last week, it is proposing massive tax increases on people
and on businesses that can't afford to pay them.

So we need to get some balance. We need to have a focus on
middle-class families to make sure that the uncertainty is lifted and
they can regain their confidence, as well as the investing public, so
we can see job creation again.

STEPHANOPOULOS: But Governor Huntsman says that you're not going
to be reaching out to broaden the base of the party, reaching out to
young people who've left the Republican Party in droves, unless you do
have that positive agenda on the environment, unless you move to the
middle on issues like gay rights. Are you prepared to do that in the
House?

CANTOR: There is no question the Republican Party has to return
to be one of inclusion, not exclusion. And we are a party with many
ideas. And we have in that a commitment to make sure that we have
positive alternatives, if we don't agree with this administration or
the House Democrats, and to continue to put those ideas forward.

And, again, the problems facing this country and the problems
facing the working moms in the suburban office parks, the problems
facing small-business people across this country are not just
Republican or Democrat problems. They are so big, they are so
challenging we all need to join together, not only in Washington, but
around the country, to put the ideas forward and let's come up with
solutions that actually produce results for a change, instead of
making matters worse, which Washington is famous for.

STEPHANOPOULOS: So the Rush Limbaugh approach of hoping the
president fails is not the Eric Cantor, House Republican approach?

CANTOR: George, absolutely not. And I don't -- I don't think
anyone wants anything to fail right now. We have such challenges.

What we need to do is we need to put forth solutions to the
problems that real families are facing today. And our common-sense,
conservative principles of limited government, and the belief in free
markets, and the belief that really opportunity can only be created by
the private sector are going to undergird our proposals going forward.

STEPHANOPOULOS: OK. Congressman Cantor, thanks very much for
your time this morning.